As the global push towards net zero carbon emissions accelerates, the understanding that critical minerals hold the key to achieving climate goals has grown.   With EV battery technology at the heart of the green energy transition, the “Battery Criticals” (lithium, cobalt, nickel, graphite and manganese) have entered the spotlight.   While initially the main focus was on the cathode materials lithium, cobalt and nickel, the realization that graphite might be equally, if not more critical has set in — for good reason.

As the key raw material in the battery anode, graphite is the largest component of lithium-ion batteries by weight. In light of “phenomenal demand growth from the EV battery sector and delays to new capacity as well as rising power costs,” the graphite supply chain represents a significant and growing challenge for automakers looking to reduce the carbon footprint of the materials they use for their EVs.

As Fastmarkets consultant Amy Bennett outlines, unlike natural graphite, which is mined and then processed for usage in the battery industry, synthetic graphite utilizes a carbon precursor product – i.e. petroleum coke, needle coke or coal tar pitch – which is then made into graphite via a process called graphitization.

Most graphite production currently takes place in China. A majority of batteries to date use a blend of natural and synthetic graphite, but there may be compelling reasons for a shift towards natural graphite as long as supply chain security can be established.

Arguing that both supply chains have “multiple environmental, social and governance (ESG) concerns, with natural graphite subject to the risks of an ongoing conflict in northern Mozambique that started in 2017,” our friends at Benchmark Mineral Intelligence have taken a closer look how both graphite materials compare, and find that “[t]the production of natural graphite anodes is around 55% less carbon intensive than the average synthetic graphite anode produced in China.”

They add:

“For natural graphite, two-thirds of the carbon emissions come from the spheroidisation process, for which China currently has a monopoly. Spheroidisation is the process in which flake graphite particles are mechanically rounded. This leads to the loss of some material, but yields improvements in the performance of the anode.”

However, while the production of natural graphite is associated with fewer carbon emissions, Benchmark sees its global supply chain remaining fragile, particularly as Mozambique, a major source of natural graphite outside of China, experiences an  ISIS-affiliated terror threat in its northern Cabo Delgado province, from where much of the country’s graphite is sourced.

Looking towards Europe, where almost 70% of natural graphite has been mined in Russia and Ukraine, Moscow’s ongoing war on Ukraine could seriously destabilize the region’s graphite production.

Meanwhile mining in Madagascar, which currently accounts for roughly 10% of global supply is threatened by severe climate events in the form of cyclones.  Finally, there is some phantom natural graphite produced in North Korea, and likely moved into the global supply chain via China – no one’s idea of a socially-responsible source of battery material.

Currently, according to the USGS, the United States is 100% import dependent for its graphite needs, but as ARPN recently pointed out,

“that’s not for lack of known graphite resources.  As USGS noted in February 2022 in its updated U.S. Mineral Deposit Database, Graphite One’s Graphite Creek deposit near Nome, Alaska is America’s largest graphite deposit.  If U.S. Government efforts to develop an American-based EV and lithium-ion battery supply chain have any hope of succeeding, looking for ways to help projects like Graphite Creek down the path to production will be, in a word…. Critical.”

Until then, China’s battery anode dominance could be the West’s Achilles heel in the green energy transition – in defense planners parlance, a potential “single point of failure”:  irrespective of whether we succeed in developing multiple minerals and metals for the battery cathode, if we are unable to meet anode material needs – and we cannot do so sustainably and ESG-friendly without natural graphite — we will not be able to build a rechargeable battery independent of China.

As ARPN outlined:

“The sourcing provisions in the energy passages of the recently passed Inflation Reduction Act, coupled with the recently announced grants to ‘supercharge’ U.S. EV battery and electric grid supply chains are important steps towards mitigating that potential single point of failure.  However, considering the long timelines for permitting for mining and processing projects, decoupling and building out a battery supply chain independent of China will warrant a concerted effort by stakeholders and policy makers to decouple from China.”